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Trump Taj Mahal could file Chapter 11 ‘within days’ – report

trumptajTrump Entertainment Resorts last remaining casino, Trump Taj Mahal, could be headed to Chapter 11, according to a report yesterday afternoon in the New York Post.

According to the report, which cites anonymous sources, the company recently violated some of its loan covenants, and negotiations with lenders have not produced a restructuring solution. The report said that the company had hoped that Carl Icahn, who holds a significant chunk of the debt, would agree to a debt-for-equity exchange, but hopes for that “have faded.”

The Post said the filing could come “within days.”

Meanwhile, online news site Philly.com reported that the Taj Mahal said in a financial filing on Aug. 22 that it could run out of cash needed to pay its bills, and it needed to either find additional borrowings or restructure its existing debt. The report did not specifically identify the filing or provide further details.

As reported, Trump Entertainment Resorts exited Chapter 11 for the third time on July 16, 2010, with Avenue Capital as the company’s largest shareholder (see “Trump Entertainment exits Ch. 11; no A/C in Atlantic City,” LCD, July 16, 2010). The reorganization featured, among other things, a $225 million rights offering backstopped by second-lien lenders, and led by Avenue, to fund distributions under the plan. The company’s first-lien lenders at the time, Beal Bank and Icahn, received a combination of cash proceeds and new secured debt, after the court rejected their rival plan proposal that would have exchanged their first-lien debt for equity.

Several months after its emergence, the company sold its Trump Marina Hotel Casino for $38 million (see “Trump Entertainment in pact to sell Trump Marina for $38M,” LCD, Feb. 15, 2011) leaving it with the Taj and the Trump Plaza.

The Trump Plaza is slated to close down on Sept. 16.

The news, if true, is just the latest blow to Atlantic City, which has seen numerous casinos close down recently. – Alan Zimmerman

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Gaming and Leisure inks $1B pro rata facility to back Penn National spin-off

Gaming and Leisure Properties disclosed today that it has obtained a $1 billion senior unsecured credit facility in connection with its spin-off from Penn National Gaming.

The five-year loan package is split between a $700 million revolver and a $300 million A term loan. Pricing is tied to a ratings-based grid, ranging from L+100-200, with a commitment fee ranging from 15-30 bps. Pricing opens at L+175. Assuming the facility’s BBB-/Ba1 ratings are maintained, pricing is expected to fall to L+150 three months after the closing date.

Earlier this month, Gaming and Leisure Properties completed a $550 million offering of 4.375% senior notes due 2018, a $1 billion offering of 4.875% notes due 2020, and a $500 million offering of 5.375% notes due 2023. Proceeds were used to back the spin-off. Lead bookrunners on the 2018 and 2023 series were Bank of America, J.P. Morgan, and RBS, while lead bookrunners on the 2020 notes were Bank of America, RBS, and Goldman Sachs.

Gaming and Leisure Properties’ spin-off became effective today. The company is now a separate company that owns the real estate associated with 21 casinos, including two facilities that are currently under development in Ohio.

Gaming and Leisure Properties is rated BB+/Ba1. – Richard Kellerhals

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Station Casinos readies $2B leveraged loan deal

Bank of America Merrill Lynch, Deutsche Bank, J.P. Morgan and Credit Suisse have scheduled a bank meeting for 1:30 p.m. EST on Thursday, Feb. 14, to launch a $1.975 billion senior secured financing for Station Casinos, according to sources.

The proposed financing is split between a $1.625 billion B term loan and a $350 million revolving credit facility. Additional details were not available at press time.

The gaming concern was last in market in September with a $775 million loan, for which Station Casinos NP Opco LLC and Station GVR Acquisition were co-borrowers. That transaction included a $200 million, five-year revolver and a $575 million, seven-year B term loan.

The institutional loan cleared the market at L+425, with a 1.25% LIBOR floor and a 99.25 offer price. It includes one year of 101 soft-call protection. Proceeds were used to refinance Station Casinos’ opco debt and loans issued by GVR.

For reference, as of Sept. 30, the company also had in place about $804 million of term debt and $521 million of notes issued at the propco level, SEC filings show.

Station’s properties are located throughout the Las Vegas Valley and include various amenities, including restaurants, entertainment venues, movie theaters, bowling and convention/banquet space, as well as traditional casino-gaming offerings. The company is rated B/B3. – Kerry Kantin

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Foxwoods proposes $520M debt reduction in final restructuring terms

The Mashantucket Pequot Tribal Nation, the Tribal gaming concern that owns Foxwoods Resort Casino, made public the finalized terms for its proposed restructuring, highlighting a $520 million reduction in debt, according to documents released on the municipal market disclosures website.

The consensual restructuring outlined would take outstanding debt to $1.72 billion, from $2.24 billion, while changing rates, terms and maturities. LCD had outlined some of the initial details of the proposal when it was announced in August. The finalized proposal preserves but extends the senior debt and special-revenue obligations, applies discounts to its subordinated special-revenue obligations and 8.5% notes, and adjusts the term and interest rates on the debt instruments and provides further mechanisms for holders of SSROs and 8.5% notes to receive additional recoveries if cash flows are available.

The total leverage will be knocked down to 7.8x, from 10.2x, according to an analysis by GLC Advisors & Co. released alongside the proposal.  GLC is the financial advisor to holders of the existing uninsured SRO, SSRO and notes. MPTN’s financial advisor for the restructuring is Miller Buckfire & Co., and its legal counsel is Weil, Gotshal & Manges.

The trustee and its counsel, Mintz Levin, will host a conference call for SSRO holders and other market participants to discuss the restructuring proposal and how it relates to the SSROs on Wednesday, Oct. 3, at 1:00 p.m. EDT, according to the notification on Friday.

Specifically, from top to bottom of the capital structure, the proposal would give Kien Huat I and II, which consist of $6 million and $15 million respectively, recovery in full from the A term loan. The $549 million bank facility will be replaced by A, B, and C term loans. The new A term loan due 2017 totals $310 million and is priced at L+400. The $260 million B term loan due 2019 is priced at L+687.5. There will also be another $27 million in senior debt, comprised of a $12 million revolver and $15 million C term loan, both due in 30 months.

The SROs, which total $609 million, including accrued and unpaid interest through Sept. 30, will become $619 million in new SROs maturing in 2025 instead of 2021, with a 7.25% rate (6.25% cash, 1% PIK), which toggles to all cash after close with a cash-flow sweep.

The SSROs, which currently total $415 million, including accrued and unpaid interest, will become $293 million in 18-year SSROs at 7.15% for three years and 6.05% thereafter.

To replace the existing 8.5% notes, there will be $208 million of new PIK-toggle notes due 2035, down from $643 million on the principal and unpaid interest portions of 8.5% notes due 2015. The new coupon is 6.5%, with 1% of in cash and the other 5.5% PIK, and it toggles to cash after eight years.

Tribal disbursements will be $42.5 million in the first year, $40 million the following year, and $35 million annually by the third year, with additional payouts dependent upon available excess cash flow. The Tribe’s share of excess cash flow will begin at 8.5% and increase to 66.75% over time as each debt facility is paid off. The Tribe will also sweep 70% of excess cash flows from new business, which will include Internet gaming. – Max Frumes

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Contentious two-day hearing reveals Patriot Coal venue dispute as vexing call

The question of whether to change the venue of Patriot Coal’s Chapter 11 case to West Virginia from the Southern District of New York is proving to be not only a contentious one for the parties involved, but also a vexing one for Bankruptcy Court Judge Shelley Chapman, if a two-day hearing this week in Lower Manhattan was any indication.

The venue hearing went on longer than most had anticipated, with day one lumbering through arguments from the proponents of a venue change – led by the United Mineworkers of America and the U.S. Trustee – and day two’s proceedings running an epic 13 hours, ending around 11:00 p.m. EDT without a ruling.

Unsurprisingly, Chapman said she would issue a decision at a later date, though she did not commit to a specific time frame. Given the controversial legal issues involved, and the considerable discretion the law affords Chapman in deciding the matter, she may want to issue a detailed written opinion explaining her specific factual findings and legal reasoning in anticipation of a possible appeal – although she is under no obligation to do so.

Venue challenges are relatively rare in large corporate bankruptcies, despite a considerable amount of forum shopping that results in the filing of many large cases in Manhattan and Wilmington, Del. Still, the issue has been a subject of conversation and controversy among legal academics for some time (see “Bankruptcy Trends: Forum-shopping debate heats up again,” LCD News, March 25, 2011).

In many ways, the debate in the Patriot Coal motion mirrors the academic debate; namely, the balancing of a debtor’s connections to and business activities in a chosen venue (or the lack thereof) against the overall convenience of the parties involved in the bankruptcy case itself, such as creditors, attorneys, lenders and potential investors, among others. The key difference, of course, is that in Patriot Coal the stakes are tangible; Chapman ultimately will have to render a decision in the matter that not only will have to address abstract legal issues, but also will carry financial implications for the company and its stakeholders, as well as potentially setting precedent for future cases.

The background

Patriot Coal filed for bankruptcy protection in Manhattan on July 9. Ten days later, the United Mine Workers, a union representing 42% of the company’s employees, filed a motion to transfer venue in the case to Charleston, W. Va., in the “interests of justice,” arguing that most of the company’s business and employees are located there, and that the state of West Virginia has a much more significant interest in the company’s reorganization than does New York (see “Patriot Coal union says Ch. 11 should be moved to West Virginia,” LCD News, July 19, 2012).

“No one mines coal in New York,” the union said in its motion.

The company (supported by numerous creditors) and several other key stakeholders, including the unsecured-creditors’ committee in the case, objected to the transfer of venue, responding that New York was a more convenient forum for most of the company’s creditors, the professionals working on the case, DIP lenders, and even the UMW itself, the headquarters of which is located in suburban Washington, D.C. “Experience has shown that the most frequent attendees at court hearings – by far – are the debtors’ professionals, the lenders’ professionals, and other material counterparties and their professionals, almost all of whom are located in New York in this case,” the company said (see “Patriot Coal defends its filing of Chapter 11 case in Manhattan,” LCD News, Aug. 29, 2012).

As for the company’s employees and retirees in West Virginia, Patriot Coal said the union “overstates the importance of the location of employees and retirees,” arguing, “It is not expected that more than a handful of employees or retirees would ever need to be present in this court.” And, the company said, “To the extent that union members – or any interested individuals – wish to monitor the proceedings, well-established technology will allow them easily and conveniently to do so.” More specifically, the company suggested that its employees and retirees could view proceedings via videoconferencing.

The UMW responded to those arguments, however, saying, “The objections give short shrift to the interests of justice standard and the principle that bankruptcy cases should be decided in a district with which the debtors have a connection.”

In seeking to focus the bankruptcy court’s attention on the “interests of justice” criteria, rather than convenience of the parties, the UMW argued that Patriot Coal’s reorganization is “not primarily about the rights of creditors, nor is it primarily about obtaining adequate financing.” Rather, the union contends, “As debtors have repeatedly declared, this is a case about their obligations to unionized workers and retirees and West Virginia’s interest in responsible environmental regulation of mining operations within its borders.”

The union also noted that anticipated Section 1113 and 1114 motions seeking to reject collective-bargaining agreements and retiree-benefit plans promised to figure prominently in the proceedings, concluding, “Where the business activity and relationships that gave rise to the labor costs and other liabilities at issue are rooted primarily in the West Virginia coalfields, it would not be in the interests of justice to uphold debtors’ blatant forum shopping.”

Meanwhile, the U.S. Trustee for the New York bankruptcy court also filed a motion arguing that venue should be transferred from the jurisdiction, on the grounds that the company’s creation of two New York subsidiaries shortly before its filing – apparently for the sole purpose of establishing venue in the state – was improper. Unlike the UMW, however, the U.S. Trustee did not urge a transfer to any other specific court.

Still, this represents the second large corporate case in a row in Manhattan in which the U.S. Trustee has raised questions regarding venue. This summer, the Trustee succeeded in having the prepackaged bankruptcy of Houghton Mifflin Harcourt Publishing transferred to bankruptcy court in Boston.

It is worth noting, however, the significant differences in the legal bases behind the Houghton Mifflin venue flap and those in Patriot Coal. In Houghton Mifflin, the U.S. Trustee argued that there was no legal basis for venue in Manhattan and that the bankruptcy court therefore had no choice but to either dismiss the case or transfer it to another court (see “Bankruptcy Trends: A look at the Houghton, Patriot Coal venue tiffs,” LCD News, Aug. 10, 2012).

Even so, Manhattan Bankruptcy Court Judge Robert Gerber refused to transfer the case until after he confirmed the company’s reorganization plan and allowed Houghton Mifflin to emerge from Chapter 11, ensuring that a venue transfer would not derail the company’s prepackaged plan that creditors unanimously supported. Only then did he move the case to Boston.

In Patriot Coal, neither the UMW nor the U.S. Trustee argues that Manhattan is an impermissible venue; rather, the venue transfer they are seeking is one based on the clear discretion of the bankruptcy court determining that there is another, more preferable venue.

In some ways, that puts Chapman in tougher pickle than the situation in which Gerber found himself, as she seeks to balance her view of the law’s venue requirements, wrapped in inherently ambiguous legal concepts like “the interests of justice” and “convenience of the parties,” in light of Manhattan’s preeminent position as a legal and financial center. Indeed, Manhattan’s position makes it a desirable and efficient bankruptcy venue of choice for large, complex companies, even those that may have relatively limited connections to the jurisdiction of the kind that typically form the bases of proper venue – companies such as Enron, WorldCom, General Motors, Chrysler, and, perhaps, Patriot Coal.

A more impartial court?

Two-way video monitors crowded Judge Chapman’s recently renovated courtroom, set up to broadcast the proceedings to courthouses in West Virginia and St. Louis, where miners, retirees, and employees at the company’s headquarters were able to watch – and only watch – the arguments made for and against the transfer.

Chapman made clear that the special broadcast was set up using existing courtroom equipment, at no cost to the estate. Per her custom, before the hearing began Chapman also read off a list of more than a dozen parties listening to the proceedings on the phone via CourtCall, a pay service often used by lawyers and financial parties instead of attending a hearing in person.

Patriot Coal lawyer Marshall Huebner, of Davis Polk & Wardwell, was first on the stand, offering a few prefatory remarks before turning the microphone over to the UMW lawyers, upon whom, he reminded the court several times, the burden of proof rested in this matter.

“There’s not really a disagreement about the facts,” said Huebner. “There may be very virulent disagreement about the interpretation of those facts.” He was right.

Susan Jennik, of New York firm Kennedy, Jennik & Murray, took the stand for the UMWA and began by noting that “hundreds” of mineworkers and retirees were watching from the courthouse in West Virginia. Chapman stopped her right there, asking that Jennik refrain from announcing how many people were watching remotely unless an accurate number could be provided for the record.

It’s worth noting that Chapman runs a tight ship. No joke she made, for example, went without a disclaimer, and she scolded lawyers for bringing snacks into her courtroom. She also asks a lot of questions, and it was rare for a lawyer to complete an argument without facing a barrage of queries and hypotheticals from her.

And Jennik, whose specialty is labor law, not bankruptcy, was interrupted more than anyone else.

Jennik’s argument hinged in large part on the experience with coal cases that judges in West Virginia have. “This industry is very specialized, particularly in the environmental damage that can be done in coal mining,” Jennik said. The business accounts for 12% of West Virginia’s gross state product. “I think the level of experience of those judges with those coal cases and the very specialized terminology would be a factor to be considered.”

It was a position that clearly held no sway with Chapman.

“This issue you’re raising, the familiarity, the fact that the judges have grown up with coal miners, that gives me some pause,” Chapman said. “In my mind, the tribunal should be completely impartial. It should be when the court doesn’t know the parties. … The fact that you’re asking me to transfer the case to a court you believe is more sympathetic, gives me pause. And for some reason, I can’t tell why, you imply this court would be less sympathetic.”

Jennik moved on to the question of convenience, but faced no less skepticism. The convenience of the professionals should not decide venue in this case, Jennik said. And while Chapman dismissed Patriot counsel’s suggestion that West Virginia was an inconvenient venue in part because planes to Charleston hold only 37 people, she also pointed out that “there are only so many seats in the courtroom, and it’s unusual to have a large number of workers and employees who attend.”

“I hear you,” she told Jennik. “I like being in the courtroom, but as a practical matter, how different would it be from what we have here today?”

“It’s an abuse of the statute”

Arguing for the U.S. Trustee, Andrea Schwartz took a different tack. “We’re asking the court to exercise the discretion afforded it by Congress, and in the interest of justice, transfer the case to another district where venue is proper.”

“Our motion is not complicated, and it is narrowly circumscribed,” Schwartz continued. “The cases before this court should not be here. The only reason they are here is that the debtors, with the assistance of Davis Polk, created two non-operating affiliates in New York solely to satisfy venue.”

“If the entities had formed six months ago, what would your position be?” Chapman asked. The same, Schwartz said. “We’re not contesting that they didn’t satisfy [the statute], we’re saying it’s an abuse of the statute.”

“This isn’t Houghton-Mifflin,” Chapman said. “Gerber agreed with you, even though everybody in the case was happy to have it here. This is a completely different case. It may be that management engaged in an analysis that it would be better for the company – not that this district would be more inclined to approve management bonuses.”

Patriot’s principal assets in New York amount to less than 3/1,000ths of 1% of its total assets, Schwartz said. “It was never intended that companies as huge as this could simply say New York is the best, it is the most convenient, it has the most consistency, has the best courthouses. I only have to form an LLC to establish venue. I don’t think that’s what Congress intended.”

The video feed to West Virginia needed to end at 5:00 p.m. EDT, bringing day one of the proceedings to an end.

Picking up again at 10:00 a.m. EDT on day two, Schwartz stressed that the U.S. Trustee is not asserting bad faith in Patriot’s establishing venue in New York, but said that Judge Chapman need not find bad faith in order to transfer the case. “If companies were allowed to create facts to fit the statute, then why have the statute at all?” she asked.

Reading tea leaves

Brian Meldrum, of Stites & Harbison, represents four surety movants with a total exposure of about $67 million – the penal amount of reclamation bonds covering Patriot Coal’s environmental obligations. “The nature of the debtors’ operations on the ground in West Virginia give West Virginia a unique and profound interest in the case,” Meldrum said. Of Patriot’s $3.7 billion in assets, $2.9 billion is in land and coal reserves, found largely in West Virginia.

But this, too, was of limited importance in Chapman’s eyes. “The coal is in the ground in West Virginia, absolutely,” she said. “Why does it follow inexorably from that premise that there’s any compelling reason for the case to be heard by a West Virginia judge? This court has presided over dozens, if not hundreds of cases involving very serious environmental issues. … So the argument that this court isn’t capable of hearing the facts and judging them, I don’t buy it.”

The proceedings took a sharp turn when Morgan Lewis partner John Goodchild came to the stand, on behalf of the 1974 Pension Trust of the UMWA, asking Patriot’s lawyers to identify any and all potential witnesses in the courtroom. “Until yesterday, I didn’t intend to call any witnesses,” Goodchild said. “Yesterday, it became clear in my view that Your Honor believes that there is more to the debtors’ intent than simply…”

“You don’t know what I believe,” Chapman interjected. “The court asks questions, and the only thing that happened yesterday was that you tried to read the tea leaves of what I was asking, and decided maybe you better call a witness because the moving parties didn’t discharge their burden.”

Chapman ultimately denied his request, but Goodchild outlined the questions he would have posed: Was there an analysis done regarding where to file the case, and what was that analysis? Who was involved in that decision, and who made it? When was that decision made? What information and considerations were taken into account in making that decision? What alternatives, in terms of venue, were considered? Why choose New York – what were the positives and negatives?

“I can say from bitter experience that my clients fare differently in different jurisdictions,” Goodchild added. “So the principle that the US Trustee is elucidating has a very real impact on my clients. … There are significant differences in the circuits in areas that do matter in this case.”

Forum shopping vs. forum selection

Returning to the stand to defend Patriot, Huebner offered a lengthy and multipronged rebuttal to the arguments of the first day and a half. His position would consist of six points, the last of which had 11 parts, he said.

But the point he returned to most frequently was the importance of finding a court that would approve Patriot’s $802 million DIP. “The financing is one of the reasons we filed in New York, because of the guidelines on roll-up mega DIPs, which West Virginia does not have. In one jurisdiction there is a much more robust track record, or experience, in large, weird exit financing. That was one of our calculations.”

Several times throughout the hearing, Chapman noted that she sees an important distinction between forum shopping and forum selection – running away from something as opposed to running to something. She reined in Huebner time and again when he overstated Patriot’s ties to New York, and reminded him that, for the miners, this case is “all or nothing,” while the large economic creditors will no doubt survive, even if they see a loss in this case. – John Bringardner/Alan Zimmerman

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Scientific Games senior notes price at par to yield 6.25%; terms

Scientific Games today completed an offering of senior notes via bookrunners Bank of America, Credit Suisse, J.P. Morgan, RBS, UBS, Deutsche Bank, Goldman Sachs, and Jefferies, according to sources. Demand for the deal led to a $50 million upsizing, while terms printed on the tight side of talk. The issuer will use funds raised from the deal to redeem its $200 million issue of 7.875% subordinated notes due 2016, which are currently callable at 103.94. Excess proceeds will be used for general corporate purposes, which might include future acquisitions, capital expenditures, stock repurchases, and debt repayment, the company says. New York City-based Scientific Games provides lottery services, instant-ticket systems, betting games, and wagering systems and services to pari-mutuel operators. Terms:

Issuer Scientific Games
Ratings BB-/B1
Amount $300 million
Issue subordinated notes (144a)
Coupon 6.25%
Price 100
Yield 6.25%
Spread T+483
FRN eq. L+465
Maturity Sept. 1, 2020
Call nc3; first call @ par +75% of coupon
Trade Aug. 15, 2012
Settle Aug. 20, 2012
Joint Bookrunners BAML/CS/JPM/RBS/UBS/DB/GS/Jeff
Co-Leads
Co’s.
Px talk 6.375% area
Notes w/ three-year equity clawback for 35% @ 106.25; carries T+50 make-whole call; w/ change-of-control put @ 101; upsized by $50 million.
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Foxwoods Casino reaches long-awaited debt-restructuring agreement

The Mashantucket Pequot Tribal Nation, the Tribal gaming concern that owns Foxwoods Resort Casino in Connecticut, yesterday announced that it has reached an agreement with steering committees of its lenders and bondholders to restructure $2.2 billion of outstanding indebtedness.

The announcement comes nearly a year after it was originally thought the company would reach an accord.

Over the next several months, the Tribal concern and the steering committees will work toward building support for the agreement and implementing the restructuring, according to the announcement.

Bank of America and Wells Fargo will arrange a $30 million working capital facility for the gaming concern with a 30-month term beginning on the restructuring date. The two banks are lenders in the $650 million RC due in 2010. Previous negotiations were going to be for a 6%, five-year line and the other due in seven years paying about 8%. The $550 million of 8.5% notes due 2015 – in default since that November 2010 – were going to be swapped for 6% notes due 2024.

The steering committees include Bank of America as administrative agent to Mashantucket’s senior secured credit facility plus representatives for other lenders and bondholders at each level of the capital structure.

Under the terms of the agreement, the senior secured credit facility and Kien Huat loans will be restructured into two term loans, with five- and seven-year maturities, respectively. Bondholders are to receive new securities with lengthened maturities of 13, 18 and 23 years based on the seniority of the existing bonds, according to the release. Maturities will be set from the restructuring date.

Holders of subordinated special revenue obligations and 8.5% notes will receive new debt at a discount to face value of accrued principal and interest, according to the release.

Though it was not in the release, sources had said previously that cutting distributions could be key to concluding the long-awaited debt reworking, whose $550 million in 8.5% notes have been in default since 2009. The per-capita distributions of up to $1,500 per month to roughly 450 members of the Mashantucket Pequot Tribe ended in March and sources told LCD at the time this will bring the net distribution to the Tribe itself, which still receives payments from casino profits, down to less than $40 million.

The situation has been dragging since August 2009 when the Tribe hired advisors, inked forbearance agreements on its revolving credit line and eventually skipped bond coupon payments in November 2009.

The senior notes were issued in November 2007 via Merrill Lynch and Morgan Stanley, at par, backing casino expansion, and last year they were pegged at 15/20 amid the ongoing restructuring talks, according to sources. Subordinated debt has been trading somewhere in the single digits recently, according to sources.

A step lower in the capital structure are subordinated special revenue bonds. A $380 million chunk was supposed to be exchanged into new 18-year paper at around 72% of par, according to previous reports. Another $575 million would be reset into 23-year paper with a $193 million face, or at a 66.4% haircut.

The gaming concern’s financial advisor for the restructuring is Miller Buckfire & Co.; and its legal counsel is Weil, Gotshal & Manges LLP. – Max Frumes

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Revel term debt sinks in trading mart as Atlantic City gambling revenue falls 9.5%

The Revel Entertainment term loan due 2017 (L+750, 1.5% LIBOR floor) sunk to an 87/88 context in the leveraged loan secondary trading market yesterday, due to disappointing May gaming revenue in Atlantic City and at the recently opened casino and hotel complex, sources said. By comparison, the loan was quoted five points higher, at 92/93, yesterday morning prior to the news.

The New Jersey Division of Gaming Enforcement on Monday  reported that gaming revenue in Atlantic City for the month of May fell 9.5% from the year-ago period, to $263 million.

Revel, which held its grand opening event over Memorial Day weekend after opening its doors in early April, ranked eighth among the area’s 12 casinos, with $13.9 million of gaming revenue during the month, up slightly from $13.4 million in April.

J.P. Morgan in February 2011 allocated an $850 million term loan for Revel, which was issued at 98.5. Proceeds of which were used to back the development of the Atlantic City gaming, hotel, and entertainment complex. It is non-callable for the first two years, followed by 102, 101 call premiums in years three and four, respectively.

This spring, the company tapped the market for a $50 million delayed-draw term loan to enhance its liquidity; the delayed-draw tranche is available in $10 million incremental through Sept. 30 and will be fungible with the existing term loan. Pricing is the same as the existing loan; it was issued at 99.01, while lenders also received a 200 bps fee to commit, sources said at the time. Waivers were required, and as a result, the excess-cash-flow sweep on the existing loan ramped up to 75%, from 50%.

Corporate ratings are B-/Caa1, while the loan is rated B/B3. – Kerry Kantin

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Casino operator Rivers Pittsburgh completes offering of second-lien notes price at par to yield 9.5%; terms

Rivers Pittsburgh Finance today completed an offering of second-lien notes via leads Goldman Sachs, Wells Fargo, and Credit Agricole, according to sources. Final terms pegged the tight end of talk, and follow-on demand indicates a gain of over one point on the break, according to sources. The size of the deal declined to $275 million, from $300 million, as bank demand for the concurrent A term loan at L+375 allowed for a $25 million upsizing, to $185 million. Proceeds from the financing, along with about $65 million of cash on hand, will be used to repay $302 million of first-lien debt and approximately $184 million of senior preferred PIK interests, according to S&P Capital IQ. Financing also includes a $15 million revolving credit facility. Terms:

Issuer Rivers Pittsburgh Finance
Ratings B/Caa1
Amount $275 million
Issue second-lien notes (144A)
Coupon 9.5%
Price 100
Yield 9.5%
Spread T+842
FRN eq. L+809
Maturity June 15, 2019
Call nc3
Trade May 30, 2012
Settle June 6, 2012
Joint Bookrunners GS/WF/CA
Co-Leads
Co’s.
Px talk 9.5-9.75%
Notes downsized by $25 million, shifted to TLA.
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Boyd Gaming outlines new debt at Peninsula following acquisition

Boyd Gaming outlined in an SEC filing the proposed structure of Bank of America Merrill Lynch, Deutsche Bank, and J.P. Morgan’s financing backing its $1.45 billion purchase of Peninsula Gaming, which includes $1.2 billion of new loans and bonds at the target, and a $300 million unsecured bond issue at the acquirer.

The commitment at Peninsula Gaming includes a $50 million, five-year super-priority revolver with a 50 bps commitment fee, an $800 million, five-year B term loan that would include 1% annual amortization and a 1.25% LIBOR floor. The filing outlined a potential offer price of 99. However, market conditions at the time of syndication typically determine the actual terms that will be offered to investors.

The commitment also provides for up to $50 million of incremental loans with 25 bps MFN protection. The term loan will be governed by maximum-leverage and minimum fixed-charge-coverage tests.

The leads also are providing a bridge to $350 million of senior unsecured notes at the target. The bridge will include a 1.5% LIBOR floor. If the bridge isn’t repaid by the one-year anniversary it will be converted into a second-lien term loan maturing 4.5 years later, for a 5.5-year final maturity.

The leads are also providing a $150 million incremental secured loan commitment to Boyd to fund its cash contribution to the transaction. The incremental loan is available as either term debt or revolver, both priced on a grid tied to leverage topping out at L+350 for leverage of greater than 6x, with a minimum of L+250 for less than 4.5x.

Finally, the leads are providing a $300 million unsecured bridge to Boyd with an eight-year final maturity priced initially at L+700, with a 1.5% LIBOR floor, according to the filing. Pricing steps up by 50 bps per quarter to an undisclosed cap. Proceeds will be used to refinance revolver borrowings, including those under the incremental revolver.

Boyd Gaming earlier said it would fund the transaction with $200 million in cash and approximately $1.2 billion in debt at the Peninsula subsidiary. The transaction will include a $144 million seller note.

The new financing at Peninsula will be used in part to repay its roughly $700 million of debt, which largely consists of $319 million of secured notes and $352 million of unsecured notes.

The six-year pay-in-kind seller notes will pay no interest in year one, rising to 6% in year two, 8% in year three and 10% thereafter. Excluding the seller notes, leverage at Peninsula will be less than 6x.

Boyd’s cash contribution will be funded through its credit facility, according to the company. The transaction is expected to be leverage neutral at Boyd, which is leveraged at 7.3x

Under the terms of the transaction, Boyd Gaming is obligated to make an additional payment in 2016 should Kansas Star Casino’s EBITDA exceed $105 million in 2015. The additional payment would be 7.5x additional EBITDA over $105 million.

The acquisition includes the Kansas Star Casino near Wichita, Kan.; Diamond Jo Casino in Dubuque, Iowa; Diamond Jo Worth in Northwood, Iowa; Evangeline Downs Racetrack & Casino in Opelousas, La.; and Amelia Belle Casino in Amelia, La.

The purchase price represents an EBITDA multiple of 7x based on the trailing 12-month EBITDA of $109 million for Peninsula’s Iowa and Louisiana properties, an annualized run-rate for Kansas Star based on its first-quarter 2012 EBITDA of $26.8 million, and corporate expense of $10 million.

Boyd Gaming expects the transaction to close by the end of 2012. – Chris Donnelly